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Gas Tax Revenues Surge in the States

While lawmakers have furiously denounced rising gas prices in recent months, state treasury officials are throwing a party. The reason? Gas tax revenues are sluicing into state and local government coffers at a record pace, supplying a windfall of gas tax revenue.

Oil companies aren't the only ones raking in the money because of rising prices at the fuel pump. The coffers of state and local governments are seeing big gains as a result of increased revenue generated by the sales tax that consumers pay on gasoline.

Sales tax receipts from the gas pumps in the fourth quarter of last year grew by nearly $100 million from the same period the year before , according to the latest figures available. And that was when California's average price for a gallon of gas at the pump, which includes state and local sales tax along with fixed state and federal excise taxes, was at $2.56.

Since 2002, sales tax revenues on gas have been growing annually by $300 million to $400 million to reach $2.86 billion in 2005, according to the California Board of Equalization. And with fuel prices at the pump already well above $3, the gas tax boom will likely continue for state and local governments.

"There's a lot of blame to go around (when it comes to high fuel prices), but the government certainly should be on the list," said Bill Leonard, a member of the Board of Equalization. "The government is the biggest profiteer of them all."

As we've written before, local, state and federal governments often "profit" more from gasoline sales than the U.S. oil industry.

Between 1977 and 2004, the oil industry’s domestic profits totaled $643 billion, after adjusting for inflation. In contrast, governments at all levels collected $1.34 trillion in gas taxes after adjusting for inflation over the same period. Graphically, the comparison is pretty striking:

State and Federal Taxes on Gasoline Production and Imports Exceed Oil Industry Profits in Most Years

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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.

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